Doctoral Dissertations

Date of Award

3-1988

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Business Administration

Major Professor

James M. Reeve

Committee Members

Jack Kiger, Jim Scheiner, Mary Sue Younger

Abstract

Previous research has identified characteristics of audit firms or of client companies which are significant in predicting why companies change audit firms. This study examined company growth. The purpose of the study was to develop a model which would use growth to predict whether a company would change from a smaller to larger-sized audit firm.

Four variables measured percentage growth in various financial values for the three years before a company changed firms. Audit firms were classified into three categories: local/regional, national, and Big Eight. Companies studied were those changing to a larger-sized audit firm from 1978 to 1982, having annual sales of $125 million or less, stock which was publicly traded, and information available for the time periods measured. Each company changing to a larger firm was matched to a company which did not change.

Statistical tests found that the companies experiencing highest growth were usually those which were youngest in age. Also, the size of companies changing firms declined over the years studied. T-tests determined that growth in (1) property, plant, and equipment, (2) sales, and (3) capitalization was significantly higher for companies which changed firms than for matched companies. The same three variables were also significant in logistic regression analysis. However, estimated R2 and total classification accuracy were less than in similar studies, limiting the model's predictive ability.

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